Actg 10 - MAS Midterm Exam

St.
Marys College of Meycauayan

Meycauayan City, Bulacan
Business and Accountancy Program
ACTG 10 - MANAGEMENT ACCOUNTING PART 1

MIDTERM EXAM
Name: _______________________________________
Year and Course: ______________________________
_________________
Score: ________________
Date:
General Instruction: Check if the number of pages of the Test Question Set
is complete and no misprint. You can use your Test Question Set as your
scratch. This exam consists of multiple choice questions,
application/computational and situational problems good for 3 hours.
Please use the test answer sheet. ERASURES WILL NOT BE CONSIDERED.
Good luck!
Question 1 - CMA 690 5.16 - Cost-Volume-Profit (CVP) Analysis
Madengrad Company manufactures a single electronic product called Precisionmix. This unit is a
batch density monitoring device attached to large industrial mixing machines used in flour, rubber,
petroleum, and chemical manufacturing. Precisionmix sells for 900 per unit. The following variable
costs are incurred to produce each Precisionmix device:
Direct labor
180
Direct materials
240
Factory overhead
105
Total variable production costs

Marketing costs
525
75
Total variable costs
600
Madengrad's income tax rate is 40%, and annual fixed costs are 6,600,000. Except for an operating
loss incurred in theyear of incorporation, the firm has been profitable over the last 5 years.
Assume a 10% increase in annual fixed costs, a 20% unit cost increase for direct labor, and a
reduction in unit material costs of 25%, with no change in selling price. Madengrad Company's
breakeven point would increase (decrease) (rounded to the nearest whole unit) by
A. 3,960 units.
B. (1,620) units.
C. 1,604 units.
D. 407 units.
Austin Manufacturing, which is subject to a 40% income tax rate, had the following operating data for
the period just ended.
Selling price per unit 60
Variable cost per unit
Fixed costs
22
504,000
Management plans to improve the quality of its sole product by (1) replacing a component that costs
3.50 with a higher-grade unit that costs 5.50, and (2) acquiring a 180,000 packing machine. Austin
will depreciate the machine over a 10-year life with no estimated salvage value by the straight-line
method of depreciation. If the company wants to earn after-tax income of 172,800 in the upcoming
period, it must sell
A. 23,800 units.
D. 19,300 units.
B. 21,316 units.
C. 22,500 units.
Question 3 - CIA 586 IV.9 - Cost-Volume-Profit (CVP) Analysis

A company sells two products, X and Y. The sales mix consists of a composite unit of 2 units of X for
every 5 units of Y (2:5). Fixed costs are 49,500. The unit contribution margins for X and Y are 2.50
and 1.20, respectively.
If the company had a profit of 22,000, the unit sales must have been:
A. Product X: 32,500, Product Y: 13,000
B. Product X: 23,800, Product Y: 59,500
C. Product X: 13,000, Product Y: 32,500
D. Product X: 5,000, Product Y: 12,500
Question 4 - ICMA 10.P2.207 - Cost-Volume-Profit (CVP) Analysis

Zipper Company invested 300,000 in a new machine to produce cones for the textile industry.
Zipper's variable costs are 30% of the selling price, and its fixed costs are 600,000. Zipper has an
effective income tax rate of 40%. The amount of sales required to earn an 8% after-tax return on its
investment would be
A. 2,080,000.
B. 914,286.
C. 2,133,333.
D. 891,429.
Breakeven quantity is defined as the volume of output at which revenues are equal to
A. fixed costs.
B. marginal costs.
C. total costs.
D. variable costs.
Ticker Company sells two products. Product A provides a contribution margin of 3 per unit, and
Product B provides a contribution margin of 4 per unit. If Ticker's sales mix shifts toward Product A,
which one of the following statements is correct?
A. Operating income will decrease if the total number of units sold remains constant.
B. The contribution margin ratios for Products A and B will change.
C. The total number of units necessary to break even will decrease.
D. The overall contribution margin ratio will increase.
For a profitable company, the amount by which sales can decline before losses occur is known as the
A. Margin of safety.
B. Marginal income rate.
C. Hurdle rate.
D. Sales volume variance.
Marston Enterprises sells three chemicals: petrol, septine, and tridol. Petrol is the company's most
profitable product; tridol is the least profitable. Which one of the following events will definitely
decrease the firm's overall breakeven point for the upcoming accounting period?
A. A decrease in tridol's selling price.
B. The installation of new computer-controlled machinery and subsequent layoff of assembly-line
workers.
C. An increase in the overall market for septine.
D. An increase in anticipated sales of petrol relative to sales of septine and tridol.
The following information relates to Clyde Corporation, which produced and sold 50,000 units during a
recent accounting period.
Sales
850,000
Manufacturing costs:
Fixed
Variable
210,000
140,000
Selling and administrative costs:

Fixed
300,000
Variable
Income tax rate:
45,000
40%
For the next accounting period, if production and sales are expected to be 40,000 units, the company
should anticipate a contribution margin per unit of
A. 1.86.
B. 7.30.
C. 3.10.
D. 13.30.
Question 10 - ICMA 10.P2.201.02 204 - Cost-Volume-Profit (CVP) Analysis

Starlight Theater stages a number of summer musicals at its theater in northern Ohio. Preliminary
planning has just begun for the upcoming season, and Starlight has developed the following
estimated data.
Average
Number of
Attendance per
Ticket
Variable
Fixed
1
2
Production Performances
Performance
Price
Costs
Costs
Mr. Wonderful 12
3,500
18
165,000
That's Life
20
3,000
15
12
49,000
All That Jazz 12
4,000
20
316,000
1 Represent payments to production companies and are based on tickets sold.

2 Costs directly associated with the entire run of each production for costumes, sets, and artist fees.
Starlight will also incur 565,000 of common fixed operating charges (administrative overhead, facility
costs, and advertising) for the entire season, and is subject to a 30% income tax rate.
If management desires Mr. Wonderful to produce an after-tax contribution of 210,000 toward the
firm's overall operating income for the year, total attendance for the production would have to be
A. 20,800.
B. 25,833.
C. 25,000.
D. 31,000.
Siberian Ski Company recently expanded its manufacturing capacity, which will allow it to produce up
to 15,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales
Department assures management that it can sell between 9,000 pairs and 13,000 pairs of either
product this year. Because the models are very similar, Siberian Ski will produce only one of the two
models.
The following information was compiled by the Accounting Department.
Per Unit (Pair) Data
MountaineeringTouring
Selling price 88.00
Variable costs
80.00
52.80
52.80
Fixed costs will total 369,600 if the mountaineering model is produced but will be only 316,800 if
the touring model is produced. Siberian Ski is subject to a 40% income tax rate.
If Siberian Ski Company desires an after-tax net income of 24,000, how many pairs of touring model
skis will the company have to sell?
A. 4,460 pairs.
B. 13,853 pairs.
C. 13,118 pairs.
D. 12,529 pairs.
Phillips & Company produces educational software. Its unit cost structure, based upon an anticipated
production volume of 150,000 units, is as follows.
Sales price
160
Variable costs
60
Fixed costs
55
The marketing department has estimated sales for the coming year at 175,000 units, which is within
the relevant range of Phillips' cost structure. Phillips' break-even volume (in units) and anticipated
operating income for the coming year would amount to

A. 96,250 units and 3,543,750 of operating income.
B. 82,500 units and 9,250,000 of operating income.
C. 96,250 units and 7,875,000 of operating income.
D. 82,500 units and 7,875,000 of operating income.
Lazar Industries produces two products, Crates and Boxes. Per unit selling prices, costs, and resource
utilization forthese products are as follows.
Crates
Boxes
Selling price
20
30
Direct material costs 5
Direct labor costs
8
Variable overhead
3
costs
Variable selling costs
1
Machine hours per unit 2
5
10
5
2
4
Production of Crates and Boxes involves joint processes and use of the same facilities. The total fixed
factory overhead cost is 2,000,000 and total fixed selling and administrative costs are 840,000.
Production and sales are scheduled for 500,000 units of Crates and 700,000 units of Boxes. Lazar
maintains no direct materials, work-in-process, or finished goods inventory.
Lazar can reduce direct material costs for Crates by 50% per unit, with no change in direct labor
costs. However, it would increase machine-hour production time by 1-1/2 hours per unit. For Crates,
variable overhead costs are allocated based on machine hours. What would be the effect on the total
contribution margin if this change was implemented?
A. 250,000 decrease.
B. 300,000 increase.
C. 125,000 increase.
D. 1,250,000 increase.
Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget.
The pro forma income statement for the current year is presented as follows.
Sales
1,500,000
Cost of sales:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Gross profit
250,000
150,000
75,000
100,000
925,000
Selling and G&A Variable
200,000
Selling and G&A Fixed
250,000
Operating income
475,000
The breakeven point (rounded to the nearest peso) for Barnes Corporation for the current year is
A. 146,341.
B. 729,730.
C. 181,818.
D. 636,364.
An organization's sales revenue is expected to be 72,600, a 10% increase over last year. For the
same period, total fixed costs of 22,000 are expected to be the same as last year. If the number of
units sold is expected to increase by 1,100, the marginal revenue per unit will be:
A. 6
B. 46
C. 4
D. 20
Robin Company wants to earn a 6% return on sales after taxes. The company's effective income tax
rate is 40%, and its contribution margin is 30%. If Robin has fixed costs of 240,000, the amount of
sales required to earn the desired return is
A. 400,000.
1,000,000.
B. 375,000.
C. 1,200,000.
D.

batch-density monitoring device attached to large industrial mixing machines used in flour, rubber,
Direct labor
180
Direct materials
240
Factory overhead
105
525
Marketing costs
75
600
loss incurred in the year of incorporation, the firm has been profitable over the last 5 years.
Assume a 10% increase in annual fixed costs, a 20% unit cost increase for direct labor, and a
reduction in unit material costs of 25%, with no change in selling price. After incorporating these
changes, Madengrad Company's contribution margin ratio would be
A. 69%
B. 36%
C. 64%
D. 34%
A company produced the following data (rounded) on its product:
Unit Cost
Marginal
Units Produced
Fixed Variable
Total
Cost
Revenue
100
85
185
85
90
50
70
120
55
90
33
65
98
55
90
25
67
92
73
90
20
75
95
107
90
If two units of product were produced and sold, the total contribution margin would be:
A. 40
B. 50
C. 25
D. 70
Question 19 - ICMA 08.P3.124.02 113 - Cost-Volume-Profit (CVP) Analysis
Phillips & Company produces educational software. Its unit cost structure, based upon an anticipated
production volumeof 150,000 units, is as follows.
Selling price
150
Variable costs
60
Contribution margin 90
Fixed costs
60
Operating income
30
Sales for the coming year are estimated at 175,000 units, which is within the relevant range of
Phillips' cost structure. Cost management initiatives are expected to yield a 20% reduction in variable
costs and a reduction of 750,000 in fixed costs. Phillips' cost structure for the coming year will
include a
A. per unit contribution margin of 72 and fixed costs of 55.
B. contribution margin ratio of 68% and operating income of 7,050,000.
C. variable cost ratio of 32% and operating income of 9,600,000.
D. total contribution margin of 15,300,000 and fixed costs of 8,250,000
Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget.
The pro forma income statement for the current year is presented as follows.
Sales
Cost of sales:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Gross profit
Selling and G&A Variable
Selling and G&A Fixed
Operating income
1,500,000
250,000
150,000
75,000
100,000
925,000
200,000
250,000
475,000
For the coming year, the management of Barnes Corporation anticipates a 10% increase in sales, a
12% increase invariable costs, and a 45,000 increase in fixed expenses. The breakeven point for next
year will be
A. 474,000.
B. 729,027.
C. 214,018.
D. 862,103.
Question 21 - CIA 1196 III.91 - Cost-Volume-Profit (CVP) Analysis
A company manufactures a single product. Estimated cost data regarding this product and other
information for theproduct and the company are as follows:
Sales price per unit
40
Total variable production cost per unit
Sales commission (on sales)
22
5%
Fixed costs and expenses:

Manufacturing overhead
5,598,720
General and administrative
3,732,480
Effective income tax rate
40%
The number of units the company must sell in the coming year in order to reach its breakeven point
is:
A. 388,800 units.
B. 583,200 units.
C. 518,400 units.
D. 972,000 units.
MultiFrame Company has the following revenue and cost budgets for the two products it sells.
Plastic Frames
Glass Frames
Budgeted unit sales 100,000
Sales price
10.00
Direct materials
Direct labor
300,000
15.00
(2.00)
(3.00)
Fixed overhead
Net income per unit 2.00
(3.00)
(5.00)
(3.00)
(4.00)
3.00
The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is
budgeted at 975,000.Assume that the company plans to maintain the same proportional mix. In
numerical calculations, MultiFrame rounds tothe nearest cent and unit.

The total number of units needed to break even if sales were budgeted at 150,000 units of plastic
frames and 300,000units of glass frames with all other costs remaining constant is
A. 153,948 units.
D. 171,958 units.
B. 365,168 units.
C. 418,455 units.

Lazar Industries produces two products, Crates and Trunks. Per unit selling prices, costs, and resource
utilization forthese products are as follows.
Crates Trunks
Selling price
20 30
Direct material costs
Direct labor costs
Variable overhead
costs
Variable selling costs
5
8
3
Machine hours per unit
5
10
5
Production of Crates and Trunks involves joint processes and use of the same facilities. The total fixed
factory overheadcost is 2,000,000 and total fixed selling and administrative costs are 840,000.
Production and sales are scheduled for500,000 Crates and 700,000 Trunks. Lazar has a normal
capacity to produce a total of 2,000,000 units in anycombination of Crates and Trunks, and maintains
no direct materials, work-in-process, or finished goods inventory.
Due to plant renovations Lazar Industries will be limited to 1,000,000 machine hours. What is the
maximum amount ofcontribution margin Lazar can generate during the renovation period?
A. 3,000,000.
B. 2,000,000.
C. 7,000,000.
D. 1,500,000.
A company that sells its single product for 40 per unit uses cost-volume-profit analysis in its
planning. The company'safter-tax net income for the past year was 1,188,000 after applying an
effective tax rate of 40%. The projected costs formanufacturing and selling its single product in the
coming year are shown below.
Variable cost per unit:
Direct material
Direct labor
5.00
4.00
6.00
Selling and administrative costs

Total variable cost per unit
3.00
18.00
Annual fixed operating costs:

6,200,000
Selling and administrative costs
3,700,000
Total annual fixed cost
9,900,000
The company has learned that a new direct material is available that will increase the quality of its
product. The newmaterial will increase the direct material costs by 3 per unit. The company will
increase the selling price of the productto 50 per unit and increase its marketing costs by 1,575,000
to advertise the higher-quality product. The number ofunits the company has to sell in order to earn a
10% before-tax return on sales would be:
A. 337,500 units.
D. 478,125 units.
B. 412,500 units.
C. 346,875 units.

Bargain Press is considering publishing a new textbook. The publisher has developed the following
cost data related to a production run of 6,000, the minimum possible production run. Bargain Press
will sell the textbook for 45 per copy. How many textbooks must Bargain Press sell in order to
generate operating earnings (earnings before interest and taxes) of20% on sales? (Round your answer
up to the nearest whole textbook.)
Estimated
Cost
Development (reviews, class testing, editing)
35,000
Typesetting
18,500
Depreciation on Equipment
9,320
General and Administrative
7,500
Miscellaneous Fixed Costs
4,400
Printing and Binding
30,000
Sales staff commissions (2% of selling price)
5,400
Bookstore commissions (25% of selling price)
67,500
Author's Royalties (10% of selling price)
27,000
Total costs at production of 6,000 copies
204,620
A. 6,199 copies.
B. 2,076 copies.
C. 5,412 copies.
D. 5,207 copies.
Mason Enterprises has prepared the following budget for the month of July.
Selling Price
Variable Cost
Sales
Per Unit
Per Unit
Per Unit
Product A
10.00
4.00
15,000
Product B
15.00
8.00
20,000
Product C
18.00
9.00
5,000
Assuming that total fixed costs will be 150,000 and the mix remains constant, the breakeven point
(rounded to the next higher whole unit) will be
A. 21,429 units.
B. 20,455 units.
C. 21,819 units.
D. 6,818 units.
A company has sales of 500,000, variable costs of 300,000, and pretax profit of 150,000. If the
company increasedthe sales price per unit by 10%, reduced fixed costs by 20%, and left variable cost
per unit unchanged, what would bethe new breakeven point in sales pesos?
A. 88,000
B. 125,000
C. 100,000
D. 110,000
The following data pertains to XYZ Company for the current year of operations.
Total
Per Unit
Sales (40,000 units)
1,000,000
Raw materials
Direct labor
25
160,000
280,000
4
7
Factory overhead:
Variable
Fixed
80,000
360,000
Selling and general expenses:

Variable
Fixed
120,000
225,000
Assuming that XYZ Company sells 80,000 units, what is the maximum that can be paid for an
advertising campaign while still breaking even?
A. 135,000
B. 695,000
C. 1,015,000
10
D. 535,000
Direct labor
180
Direct materials
Factory overhead
240
105
525
Marketing costs
75
600
The annual sales volume required for Madengrad Company to break even is
A. 8,400 units.
D. 22,000 units.
B. 11,000 units.
C. 13,888 units.

Carson Inc. manufactures only one product and is preparing its budget for next year based on the
following information.
Selling price per unit
Variable costs per unit
Fixed costs
Effective tax rate
100
75
250,000
35%
If Carson wants to achieve a net income of 1.3 million next year, its sales must be
A. 80,000 units.
B. 70,200 units.
C. 62,000 units.
D. 90,000 units.
Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last
year, the shirts sold for 7.50 each, and the variable cost to manufacture them was 2.25 per unit.
The company needed to sell 20,000shirts to break even. The net income last year was 5,040.
Donnelly's expectations for the coming year include the following:
The sales price of the T-shirts will be 9
Variable cost to manufacture will increase by one-third
Fixed costs will increase by 10%
The income tax rate of 40% will be unchanged
If Donnelly Corporation wishes to earn 22,500 in net income for the coming year, the company's
sales volume inpesos must be
A. 257,625
B. 229,500
C. 213,750
D. Some amount other than those given.

The margin of safety is a key concept of CVP analysis. The margin of safety is:
A. The difference between budgeted sales and breakeven sales.
B. The contribution margin rate.
C. The difference between budgeted contribution margin and breakeven contribution margin.
11
D. The difference between the breakeven point in sales and cash flow breakeven.
Delphi Company has developed a new project that will be marketed for the first time during the next
fiscal year. Although the Marketing Department estimates that 35,000 units could be sold at 36 per
unit, Delphi's management has allocated only enough manufacturing capacity to produce a maximum
of 25,000 units of the new product annually. The fixed costs associated with the new product are
budgeted at 450,000 for the year, which includes 60,000 for depreciation on new manufacturing
equipment. Data associated with each unit of product are presented as follows. Delphi is subject to
a40% income tax rate.
12
Variable Costs
Direct material
7.00
Direct labor
3.50
4.00
Total variable manufacturing cost
14.50
Selling expenses
1.50
Total variable cost
16.00
The maximum after-tax profit that can be earned by Delphi Company from sales of the new product
during the next fiscal year is
A. 30,000.
B. 110,000.
C. 66,000.
D. 50,000.
Data regarding four different products manufactured by an organization are presented as follows.
Direct material and direct labor are readily available from the respective resource markets. However,
the manufacturer is limited to a maximum of 3,000 machine hours per month.
Products
A
B
C
D
Unit price
15
18
20
25
Variable cost
11
10
16
Units Produced per Machine Hour
The product that is the most profitable for the manufacturer in this situation is
A. Product D.
B. Product C.
C. Product A.
D. Product B.
Plastic Frames
Glass Frames
Sales price
10.00
Direct materials
Direct labor
300,000
15.00
(2.00)
(3.00)
Fixed overhead
(3.00)
(5.00)
(3.00)
(4.00)
3.00
The total number of units MultiFrame needs to produce and sell to break even is
A. 354,545 units.
B. 300,000 units.
C. 177,273 units.
D. 150,000 units.
BE&H Manufacturing is considering dropping a product line. It currently produces a multi-purpose
woodworking clamp in a simple manufacturing process that uses special equipment. Variable costs
amount to 6.00 per unit. Fixed overhead costs, exclusive of depreciation, have been allocated to this
13
product at a rate of 3.50 a unit and will continue whether or not production ceases. Depreciation on
the special equipment amounts to 20,000 a year. If production of the clamp is stopped, the special
equipment can be sold for 18,000; if production continues, however, the equipment will be useless
for further production at the end of 1 year and will have no salvage value. The clamp has a selling
price of 10 a unit. Ignoring tax effects, the minimum number of units that would have to be sold in
the current year to break even on a cash flow basis is
A. 20,000
B. 5,000
C. 4,500
D. 36,000
The term relevant cost applies to all the following decision situations except the
A. Replacement of equipment.
B. Manufacture or purchase of component parts.
C. Acceptance of a special order.
D. Determination of a product price.
Ace Manufacturing plans to produce two products, Product C and Product F, during the next year, with
the following characteristics.
Product C
Product F
15
Variable cost per unit
10
Expected sales (units)
20,000
5,000
Total projected fixed costs for the company are 30,000. Assume that the product mix would be the
same at the breakeven point as at the expected level of sales of both products. What is the projected
number of units (rounded) of Product C to be sold at the breakeven point?
A. 11,538 units.
B. 9,231 units.
C. 15,000 units.
D. 2,308 units.

Eagle Brand Inc. produces two products. Data regarding these products are presented below.
ProductX ProductY
Selling price per unit
100
130
80
100
Raw materials used per unit 4 lbs. 10 lbs.

Eagle Brand has 1,000 lbs. of raw materials which can be used to produce Products X and Y.
Which one of the alternatives below should Eagle Brand accept in order to maximize contribution
margin?
A. 250 units of product X.
B. 200 units of product X and 50 units of product Y.
C. 200 units of product X and 20 units of product Y.
D. 100 units of product Y.
In a manufacturing environment, the best short-term profit maximizing approach would be to
A. Maximize contribution per unit times the number of units sold.
B. Minimize variable costs per unit times the number of units produced.
C. Minimize fixed overhead cost per unit by producing at full capacity.
D. Maximize unit gross profit times the number of units sold.
The following data pertains to XYZ Company for the current year of operations.
Total
Per Unit
Sales (40,000 units)
1,000,000
25
14
Raw materials
Direct labor
160,000
280,000
4
7
Factory overhead:
Variable
Fixed
80,000
360,000
Selling and general expenses:

Variable
Fixed
120,000
225,000
How many units does XYZ Company need to produce and sell to make a before-tax profit of 10% of
sales?
A. 90,000 units.
B. 65,000 units.
C. 36,562 units.
D. 25,000 units.
United Industries manufactures three products at its highly automated factory. The products are very
popular, withdemand far exceeding the company's ability to supply the marketplace. To maximize
profit, management should focuson each product's
A. Contribution margin ratio.
B. Contribution margin per machine hour.
C. Gross margin.
D. Segment margin.
When used in cost-volume-profit analysis, sensitivity analysis
A. Is done through various possible scenarios and computes the impact on profit of various predictions
of future events.
B. Determines the most profitable mix of products to be sold.
C. Is limited because in cost-volume-profit analysis, costs are not separated into fixed and variable
components.
D. Allows the decision maker to introduce probabilities in the evaluation of decision alternatives.
batch-densitymonitoring device attached to large industrial mixing machines used in flour, rubber,
petroleum, and chemicalmanufacturing. Precisionmix sells for 900 per unit. The following variable
costs are incurred to produce eachPrecisionmix device:
Direct labor
180
Direct materials
Factory overhead
240
105
525
Marketing costs
75
600
If Madengrad Company achieves a sales and production volume of 8,000 units, the annual before-tax
income (loss) willbe
A. (420,000)
B. (2,520,000)
C. 1,780,000
D. (4,200,000)
15
Wilkinson Company sells its single product for 30 per unit. The contribution margin ratio is 45% and
Wilkinson has fixed costs of 10,000 per month. If 3,000 units are sold in the current month,
Wilkinson's income would be
A. 49,500.
B. 40,500
C. 90,000.
D. 30,500.

Which of the following will result in raising the breakeven point?
A. A decrease in income tax rates.
B. An increase in the semi-variable cost per unit.
C. A decrease in the variable cost per unit.
D. An increase in the contribution margin per unit.
Bruell Electronics Co. is developing a new product, surge protectors for high-voltage electrical flows.
The following cost information relates to the product:
Unit Costs
Direct materials
3.25
Direct labor
4.00
Distribution
.75
The company will also be absorbing 120,000 of additional fixed costs associated with this new
product. A corporate fixed charge of 20,000 currently absorbed by other products will be allocated to
this new product.
How many surge protectors (rounded to the nearest hundred) must Bruell Electronics sell at a selling
price of 14 per unit to gain 30,000 additional income before taxes?
A. 10,700 units.
B. 20,000 units.
C. 25,000 units.
D. 12,100 units.
Total production costs of prior periods for a company are listed as follows. Assume that the same cost
behavior pattern scan be extended linearly over the range of 3,000 to 35,000 units and that the cost
driver for each cost is the number of units produced.
Production (units/month):
3,000
9,000
16,000
35,000
Cost X:
178,260
23,700
Cost Y:
47,280
52,680
141,840
86,490
252,160
551,600
The company is concerned about its current operating performance that is summarized as follows.
Sales (12.50 per unit)
300,000
Variable costs
180,000
Net operating loss
(40,000)
How many additional units should have been sold in order for the company to break even?
A. 8,000
B. 16,000
C. 32,000
D. 12,800

Cost-volume-profit (CVP) analysis is a key factor in many decisions, including choice of product lines,
pricing of products, marketing strategy, and use of productive facilities. A calculation used in a CVP
analysis is the breakeven point. Once the breakeven point has been reached, operating income will
increase by the:
A. Fixed costs per unit for each additional unit sold.
16
B. Contribution margin per unit for each additional unit sold.

C. Gross margin per unit for each additional unit sold.
D. Variable costs per unit for each additional unit sold.
Direct labor
180
Direct materials
240
Factory overhead
105
525
Marketing costs
75
600
loss incurred in the year of incorporation, the firm has been profitable over the last 5 years.
For Madengrad Company to achieve an after-tax net income of 540,000, annual sales revenue must
be
A. 21,420,000
B. 2,700,000
C. 22,500,000
D. 23,850,000
Two companies produce and sell the same product in a competitive industry. Thus, the selling price of
the product for each company is the same. Company 1 has a contribution margin ratio of 40% and
fixed costs of 25 million. Company2 is more automated, making its fixed costs 40% higher than
those of Company 1. Company 2 also has a contribution margin ratio that is 30% greater than that of
Company 1. By comparison, Company 1 will have the _____ breakeven point in terms of peso sales
volume and will have the _____ peso profit potential once the indifference point in peso sales volume
is exceeded.
A. Higher, Greater
B. Higher, Lesser
C. Lower, Greater
D. Lower, Lesser
All of the following are assumptions of cost-volume-profit analysis except
A. total fixed costs do not change with a change in volume.
B. sales mix for multi-product situations do not vary with volume changes.
C. variable costs per unit change proportionately with volume.
D. revenues change proportionately with volume.
Bruell Electronics Co. is developing a new product, surge protectors for high-voltage electrical flows.
The following cost information relates to the product:
Unit Costs
Direct materials
3.25
Direct labor
4.00
Distribution
.75
The company will also be absorbing 120,000 of additional fixed costs associated with this new
product. A corporate fixed charge of 20,000 currently absorbed by other products will be allocated to
this new product.
If the selling price is 14 per unit, the breakeven point in units (rounded to the nearest hundred) for
17
surge protectors is
A. 8,500 units.
B. 10,000 units.
C. 20,000 units.
D. 15,000 units.
A company sells two products, X and Y. The sales mix consists of a composite unit of 2 units of X for
every 5 units of Y(2:5). Fixed costs are 49,500. The unit contribution margins for X and Y are 2.50
and 1.20, respectively.
Considering the company as a whole, the number of composite units to break even is:
A. 22,500
B. 4,500
C. 8,250
D. 1,650
Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for
introduction. However, plant capacity is limited, and only one product can be introduced at present.
Therefore, Gleason has conducted a market study, at a cost of 26,000, to determine which product
will be more profitable. The results of the study follow.
Sales of Desserts
at 1.80/unit
Sales of Rolls
at 1.20/unit
Volume
Volume
Probability
Probability
250,000
.30
200,000
.20
300,000
.40
250,000
.50
350,000
.20
300,000
.20
400,000
.10
350,000
.10
The costs associated with the two products have been estimated by Gleason's cost accounting
department and are shown as follows.
Dessert
Rolls
Ingredients per unit
.40
.25
Direct labor per unit
.35
.30
Variable overhead per unit .40
.20
Production tooling*
48,000
25,000
Advertising
30,000
20,000
*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed
asset. The expected value of Gleason's operating profit directly traceable to the sale of frozen
desserts is
A. 198,250.
B. 120,250.
C. Some amount other than those given.
D. 150,250.
Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last
year, the shirts sold for 7.50 each, and the variable cost to manufacture them was 2.25 per unit.
The company needed to sell 20,000shirts to break even. The net income last year was 5,040.
Donnelly's expectations for the coming year include the following:
The sales price of the T-shirts will be 9
Variable cost to manufacture will increase by one-third
Fixed costs will increase by 10%
The income tax rate of 40% will be unchanged
The number of T-shirts Donnelly Corporation must sell to break even in the coming year is
18
A. 20,000
B. 19,250
C. 17,500
D. Some amount other than those given.
If inventories are expected to change, the type of costing that provides the best information for
breakeven analysis is:
A. Variable (direct) costing. B. Job order costing.
(full) costing.
C. Joint costing.
D. Absorption

Plastic FramesGlass Frames
Sales price
10.00
(2.00)
Direct materials
Direct labor
(3.00)
Fixed overhead
(3.00)
300,000
15.00
(3.00)
(5.00)
(4.00)
3.00
The total number of units needed to break even if the budgeted direct labor costs were 2 for plastic
frames instead of3 is
A. 154,028 units.
B. 144,444 units.
C. 156,000 units.
D. 146,177 units.
One of the major assumptions limiting the reliability of breakeven analysis is that
A. Total fixed costs will remain unchanged over the relevant range.
B. Total variable costs will remain unchanged over the relevant range.
C. The cost of production factors varies with changes in technology.
D. Efficiency and productivity will continually increase.
Siberian Ski Company recently expanded its manufacturing capacity, which will allow it to produce up
to 15,000 pairsofcross-country skis of the mountaineering model or the touring model. The Sales
Department assures management thatit can sell between 9,000 pairs and 13,000 pairs of either
product this year. Because the models are very similar,Siberian Ski will produce only one of the two
models.
The following information was compiled by the Accounting Department.
Per Unit(Pair)Data
Mountaineering
Touring
Selling price
88.00
80.00
Variable costs
52.80
52.80
Fixed costs will total 369,600 if the mountaineering model is produced but will be only 316,800 if
the touring model isproduced. Siberian Ski is subject to a 40% income tax rate.
The total sales revenue at which Siberian Ski Company would make the same profit or loss regardless
of the ski model itdecided to produce is
A. 880,000.
B. 686,400.
C. 422,400.
D. 924,000.
19
Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for
introduction. However, plant capacity is limited, and only one product can be introduced at present.
Therefore, Gleason has conducted a market study, at a cost of 26,000, to determine which product
will be more profitable. The results of the study follow.
Sales of Desserts
Sales of Rolls
at 1.80/unit
at 1.20/unit
Volume
Probability
Volume
Probability
250,000
.30
200,000
.20
300,000
.40
250,000
.50
350,000
.20
300,000
.20
400,000
.10
350,000
.10
The costs associated with the two products have been estimated by Gleason's cost accounting
department and are shown as follows.
Dessert
Rolls
Ingredients per unit
.40
.25
Direct labor per unit
.35
.30
Variable overhead per unit .40
.20
Production tooling*
48,000
25,000
Advertising
30,000
20,000
*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed
asset. Applying a deterministic approach, Gleason's revenue from sales of frozen desserts would be
A. 216,000.
B. Some amount other than those given.
C. 540,000.
D. 549,000.
Question 62 - ICMA 10.P2.201.01.201 - Cost-Volume-Profit (CVP) Analysis
Starlight Theater stages a number of summer musicals at its theater in northern Ohio. Preliminary
planning has justbegun for the upcoming season, and Starlight has developed the following estimated
data.
Average
Number of Attendance per Ticket
Variable
Fixed
1
2
Production Performances
Performance Price
Costs
Costs
Mr. Wonderful 123,500
165,000
18
That's Life
15
12
49,000
200
16,000
203,000
All That Jazz 124,000
1Represent payments to production companies and are based on tickets sold.

2Costs directly associated with the entire run of each production for costumes, sets, and artist fees.
Starlight will also incur 565,000 of common fixed operating charges (administrative overhead, facility
costs, and advertising) for the entire season, and is subject to a 30% income tax rate.
If Starlight's schedule of musicals is held as planned, how many patrons would have to attend for
Starlight to break even during the summer season?
A. 79,302.
B. 81,390.
C. 77,918.
D. 79,938.
Delphi Company has developed a new project that will be marketed for the first time during the next
fiscal year. Although the Marketing Department estimates that 35,000 units could be sold at 36 per
unit, Delphi's management has allocated only enough manufacturing capacity to produce a maximum
of 25,000 units of the new product annually. The fixed costs associated with the new product are
budgeted at 450,000 for the year, which includes 60,000 for depreciation on new manufacturing
equipment. Data associated with each unit of product are presented as follows. Delphi is subject to
a40% income tax rate.
Variable Costs
20
Direct material
Direct labor
7.00
3.50
4.00
Total variable manufacturing cost
14.50
Selling expenses
1.50
Total variable cost
16.00
Delphi Company's management has stipulated that it will not approve the continued manufacture of
the new productafter the next fiscal year unless the after-tax profit is at least 75,000 the first year.
The unit selling price to achieve thistarget profit must be at least
A. 36.60.
B. 39.00.
C. 37.00.
D. 34.60.

Moorehead Manufacturing Company produces two products for which the following data have been
tabulated. Fixed manufacturing cost is applied at a rate of 1.00 per machine hour.
Per Unit
XY-7
BD-4
Selling price
4.00
3.00
Variable manufacturing cost 2.00
1.50
Fixed manufacturing cost

Variable selling cost
.75
.20
1.00
1.00
The sales manager has had a 160,000 increase in the budget allotment for advertising and wants to
apply the money to the most profitable product. The products are not substitutes for one another in
the eyes of the company's customers.
Suppose the sales manager chooses to devote the entire 160,000 to increased advertising for XY-7.
The minimum
increase in sales units of XY-7 required to offset the increased advertising is:
A. 640,000 units.
B. 160,000 units.
C. 128,000 units.
D. 80,000 units.
Allred Company sells its single product for 30 per unit. The contribution margin ratio is 45%, and
fixed costs are10,000 per month. Allred has an effective income tax rate of 40%. If Allread sells
1,000 units in the current month, Allred's variable expenses would be
A. 13,500.
B. 9,900.
C. 16,500.
D. 12,000.
Susan Hines has developed an estimate of the earnings per share for her firm for the next year using
the following parameters.
Sales
20 million
Cost of goods sold
70% of sales
General & administrative expenses
300,000
Selling expense
100,000 plus 10% of sales
Debt outstanding
5 million @ 8% interest rate
Effective tax rate
35%
Common shares outstanding
2 million
She is now interested in the sensitivity of earnings per share to sales forecast changes. A 10% sales
increase would increase earnings per share by
A. 20.0 cents per share.
B. 7.0 cents per share.
C. 13.0 cents per share.
21
D. 10.4 cents per share.

Moorehead Manufacturing Company produces two products for which the following data have been
tabulated. Fixed manufacturing cost is applied at a rate of 1.00 per machine hour.
Per Unit XY-7
BD-4
Selling price
4.00
3.00
Variable manufacturing cost 2.00
1.50
Fixed manufacturing cost

Variable selling cost
.75
1.00
.20
1.00
The sales manager has had a 160,000 increase in the budget allotment for advertising and wants to
apply the money to the most profitable product. The products are not substitutes for one another in
the eyes of the company's customers.
Suppose the sales manager chooses to devote the entire 160,000 to increased advertising for BD-4.
The minimum increase in sales pesos of BD-4 required to offset the increased advertising would be
A. 1,600,000
B. 320,000
C. 960,000
D. 160,000
Which of the following would decrease unit contribution margin the most?
A. A 15% decrease in selling price.
B. A 15% decrease in variable expenses.
C. A 15% increase in variable expenses.
D. A 15% decrease in fixed expenses.
Specialty Cakes Inc. produces two types of cakes, a 2 lbs. round cake and a 3 lbs. heart-shaped cake.
Total fixed costs for the firm are 94,000. Variable costs and sales data for the two types of cakes are
presented below.
2 lbs.
3 lbs.
Round Cake
Heart-shape Cake
20
Variable cost per unit8
15
Current sales (units) 10,000
15,000
If the product sales mix were to change to three heart-shaped cakes for each round cake, the
breakeven volume for each of these products would be
A. 12,261 round cakes, 8,174 heart-shaped cakes.
B. 15,326 round cakes, 8,109 heart-shaped cakes.
C. 8,174 round cakes, 12,261 heart-shaped cakes.
D. 4,948 round cakes, 14,843 heart-shaped cakes.
Bolger and Co. manufactures large gaskets for the turbine industry. Bolger's per unit sales price and
variable costs for the current year are as follows.
Sales price per unit 300
210
Bolger's total fixed costs aggregate 360,000. As Bolger's labor agreement is expiring at the end of
the year, management is concerned about the effect a new agreement will have on its unit breakeven
point. The controller performed a sensitivity analysis to ascertain the estimated effect of a 10 per
unit direct labor increase and a 10,000 reduction in fixed costs. Based on these data, it was
determined that the breakeven point would
A. decrease by 1,000 units.
B. increase by 375 units.
22
C. decrease by 125 units.

D. increase by 500 units
***END OF TEST QUESTIONS SET***
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Marys College of Meycauayan

ACTG 10 - MANAGEMENT ACCOUNTING PART 1

Total variable production costs

Total variable costs

Question 3 - CIA 586 IV.9 - Cost-Volume-Profit (CVP) Analysis

Question 4 - ICMA 10.P2.207 - Cost-Volume-Profit (CVP) Analysis

Selling and administrative costs:

Question 10 - ICMA 10.P2.201.02 204 - Cost-Volume-Profit (CVP) Analysis

All That Jazz 12

1 Represent payments to production companies and are based on tickets sold.

operating income for the coming year would amount to

Selling and G&A Variable

Selling and G&A Fixed

Question 17 - CMA 690 5.15 - Cost-Volume-Profit (CVP) Analysis

Total variable production costs

Total variable costs

Fixed costs and expenses:

General and administrative

Effective income tax rate

numerical calculations, MultiFrame rounds tothe nearest cent and unit.

Question 23 - ICMA 10.P2.217 - Cost-Volume-Profit (CVP) Analysis

Machine hours per unit

Selling and administrative costs

Annual fixed operating costs:

Selling and administrative costs

Total annual fixed cost

Question 25 - ICMA 10.P2.206 - Cost-Volume-Profit (CVP) Analysis

General and Administrative

Miscellaneous Fixed Costs

Printing and Binding

Sales staff commissions (2% of selling price)

Bookstore commissions (25% of selling price)

Author's Royalties (10% of selling price)

Total costs at production of 6,000 copies

Selling and general expenses:

Total variable production costs

Question 30 - ICMA 10.P2.202 - Cost-Volume-Profit (CVP) Analysis

Question 32 - CMA 1286 5.13 - Cost-Volume-Profit (CVP) Analysis

Total variable manufacturing cost

Total variable cost

Units Produced per Machine Hour

Variable cost per unit

Expected sales (units)

Question 39 - ICMA 10.P2.209 - Cost-Volume-Profit (CVP) Analysis

Raw materials used per unit 4 lbs. 10 lbs.

Selling and general expenses:

Total variable production costs

Total variable costs

Question 46 - CIA 577 IV.11 - Cost-Volume-Profit (CVP) Analysis

Net operating loss

Question 49 - CMA 1286 5.12 - Cost-Volume-Profit (CVP) Analysis

B. Contribution margin per unit for each additional unit sold.

Total variable production costs

Total variable costs

Direct labor per unit

Variable overhead per unit .40

Question 58 - CMA 1290 4.5 - Cost-Volume-Profit (CVP) Analysis

Question 61 - CMA 687 5.22 - Cost-Volume-Profit (CVP) Analysis

Direct labor per unit

Variable overhead per unit .40

All That Jazz 124,000

1Represent payments to production companies and are based on tickets sold.

Total variable manufacturing cost

END OF TEST QUESTIONS SET